News that outgoing Bank of America chief Ken Lewis will get docked his pay for 2009 isn’t likely to elicit many tears of sympathy from the public. Exorbitantly paid CEOs are the poster children for the business excesses, greed and poor judgment that helped bring the nation’s financial system to the brink of collapse. Their actions, among others, fueled the economic crisis that has left many Americans jobless and homeless.
Some won’t agree with the decision of the Obama administration’s pay czar that Lewis deserves not a dime of salary. After all, BofA’s troubles were the result of bad decisions of many, including pressure from the federal government to proceed with the troubled Merrill Lynch deal when Lewis wanted to back out.
But when you head a company, you are in charge. BofA’s problems, and the financial fallout, rest squarely on Lewis’ shoulders. The last quarter alone, BofA lost $2.2 billion, the bank announced recently.
Ken Feinberg, appointed this summer to examine the compensation of executives at companies receiving federal bailout money, suggested Lewis get no pay. Lewis is retiring, and Feinberg said his retirement package and vested stock worth at least $69.3 million was enough.
The bank said the pay master didn’t have the legal authority to “claw back” all the expected pay of $1.5 million. But Lewis and the bank agreed anyway.
This claw back should be a wake-up call to all companies that give their CEOs and other executives huge salaries, bonuses or golden parachutes when they leave — even as the companies flounder and fail. The other companies that received “exceptional assistance” — bailouts — from the government should especially take note.
Feinberg already has AIG firmly in his sights, and rightly so. The company got billions in bailout dollars. A few months later, it doled out millions in bonuses to employees involved in the same kind of risk-taking that were a cause of some of the nation’s financial woes.
Treasury officials said Feinberg’s actions should signal to companies that they need to strike the right balance “to discourage excessive risk taking and reward performance for their top executives.” That balance is sorely needed.
The days of wine and roses for executives who get big pay while their companies hit the skids must end. We don’t begrudge executives pay that rewards them for performance. But too many got rewarded for irresponsible risk-taking, and we taxpayers are underwriting the cleanup for their messes. Some claw back of that money is warranted.
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